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Did the IMF cause a famine? Malawi faces starvation—after, it seems, heeding Western advice on managing food stocks - Features - International Monetary Fund

As the world food summit ended in Rome this month in a drizzle of non-action (non-attendance in the case of Britain's development minister, Clare Short) hundreds -- possibly thousands -- had already died of hunger in Malawi. The only offer on the table -- a technical paper from the US on how biotechnology could combat world poverty -- was too late for them and insultingly irrelevant to millions more living in the shadow of hunger throughout the rest of southern Africa.

A few days later, the UN World Food Programme declared that almost 13 million people in the region were at risk of starvation; and that in Malawi alone, some three million people were living a precarious existence, hoping for emergency aid.

Optimists could point out that the summit confirmed the target, set six years ago, to reduce by half the number of people threatened with hunger (around 800 million) by 2015. But it remains a mystery what is on offer to achieve this reduction beyond tired talk of cleaning up corruption (how?) and encouraging more liberalisation through structural adjustment programmes -- which remain, despite all evidence of past failure, the favoured tool of the World Bank and the IMF.

However all this sounded in Rome, it provoked anger in Lilongwe, the capital of Malawi, where there were reports of people killing mice to sell for food. President Bakili Muluzi accused the IMF of forcing the country to sell its grain reserves -- just before the 2001 crop failure.

The accusations arose last month when two ministers said the IMF had told the government to sell maize from strategic reserves to enable the state-owned food agency to pay off its commercial debts. The IMF's "request" carried weight since its bargaining counter was a $47m aid package agreed in December 2000. The package is currently being withheld.

"The IMF cannot refute this," Muluzi told Reuters. "I myself argued with them over this issue of selling government reserves and they insisted. It was their decision imposed on us."

The IMF representative in Malawi, Girma Begashaw, replied: "We did not instruct the Malawi government or the NFRA [National Food Reserve Agency] to dispose of the reserves.... We have no expertise in food security policy." It said that the government made the decision after ignoring expert advice from the EU.

The story turns out to be more complicated but also more revealing of the pressures that countries such as Malawi must routinely deal with in order to qualify for debt relief, aid packages and balance of payments support. The detail is in a report from ActionAid ("State of Disaster" by Stephen Devereux, Institute for Development Studies, Sussex University).

Malawi had traditionally kept a strategic grain reserve. The IMF, EU and others advised that this should be run independently of the government, covering its own costs. As a result, in 1999, a National Food Reserve Agency was set up. That year was a bumper harvest and the agency stocked up but -- following IMF guidelines -- borrowed commercially to buy the grain at an interest rate of 56 per cent. The IMF argued that the grain board should sell off stocks to pay the debt but, after another bumper harvest in 2000, prices were still very low. There was little point in selling. The debt mounted and the maize started to rot.

In early 2001, the IMF repeated its advice to sell -- and to sell abroad rather than undermine producers in Malawi. The grain board responded enthusiastically, virtually depleting stocks. According to the IMF, this may have been to the enrichment of government officials, though there is as yet no evidence. By May 2001, the grain had been sold to Mozambique and Kenya. The IMF insists that stocks should not have been depleted entirely and should have been replenished by the 2001 harvest. But the 2001 harvest was severely reduced by floods. The IMF has since claimed with disarming insouciance: "The advice would have been correct if the information was correct."

The IMF's efforts (backed by the EU and other donors) to impose liberalisation on a sovereign state's agricultural sector appear to have ended up with the country facing its worst famine since independence. Last month, to make sure that it was correctly conveying its liberalisation message, the IME announced that it was withholding a $47m aid payment on the grounds that government "interventions in the food and other agricultural markets ... crowd out more productive spending". These included a government "starter pack" of high-yield seeds and fertilisers that were to have given farmers a fall-back crop in times of bad harvests.

According to IMF orthodoxy, such subsidies distort the market. Poor countries would agree. The US went to Rome having just agreed $180bn subsidies over ten years to its own farmers, the EU subsidises its agriculture at around $20,000 a year per farmer. This denies poor countries fair access to US and European markets, depresses commodity prices and allows the rich world to dump food in developing countries to the detriment of some of the world's poorest people.

As Marcus de Moraes, Brazil's minister of agriculture, puts it: "If we eliminated agricultural subsidies for 24 days, we would eliminate hunger in the world."